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Good News Can Be Bad for You

The mood on Wall Street has turned happy, or at least less worried. First quarter GDP was revised up, exports are strong and the stock market is rallying.

But long-term interest rates are also rallying. The latest nationwide jumbo mortgage rate is 7.18 percent, up 20 basis points in a week. And a belief in a continued strong world economy helps to keep oil prices high.

“As long as it looks okay, gas prices and long-term interest rates are going up,” Robert Barbera, the chief economist of ITG, said.

Can the American economy avoid recession with a continued housing crunch being exacerbated by higher mortgage rates, and with higher gasoline prices serving as a tax on everyone who drives and holding down consumer spending on other things? Wall Street seems to think so.

We’re in for a long term stagflation economy. The government can cook the inflation numbers all it wants but ordinary people can barely get by.

The market will be much like it was through most of 1970s. Solid regularly rising dividend payers will do better than the market. This around there’ll be no Reagan Revolution to bail the market out with major tax cuts.

Welcome to the New Middle Ages in which the lords and ladies of the manor are the banks, big oils and the credit card processors. Instead of fat friars and devious cardinals lulling the peasants into submession with blessings, prayers, and indulgences, there’ll be sex anyway you like it and entertainment to anesthetize the folks.

Re your new column on military benefits Tricare is not a good a health insurance plan. For starters its deductibles are very high. In addition to an inadequate fee schedule the government is a very slow payer which makes it hard for patients to see the best doctors.

Enlistments will continue to be a problem so long as the army remains tied down in unwinnable wars. Very generous education benefits will help although Senator McCain is right to assert reenlistment rates will drop. The army’s problem today is quality recruits. Since the Iraq and Afghanistan wars went sour, the army has had to rely more and more on recruits requiring moral waivers and/or low test scores.

The renewal of the draft would have already happened were it not for likely legal necessity to induct women.

We have seen the heads of virtually all financial institutions stand up over the last few months and
claim the worst is behind us. Why would anyone listen to these people? They didn’t see the
disaster coming, and yet somehow they are qualified to tell us it is all alright! Perhaps I am just
unduly sceptical, but this reeks of a conspiracy of optimism. The recession has barely started, let
alone reached its nadir. The market moves of late have all the hallmarks of a classic sucker’s rally.
This isn’t discounting the recovery, this is denial! Far from being behind us, the worst may well still
be ahead!

As far as your article of today is concerned, Health Care would remain a major factor in adversely affecting US competetiveness going forward. US is the only industrialized country that does not have a universal health care policy/plan and in my view it can not compete with the Canadian and European countries that have removed this cost/burden from the employer and fund it through the general taxation pools. For example, the health care cost for a family of four for GM employees in Canada is a fraction of what it would cost in the US.

If the US is serious about rebuilding its manufacturing base in this competitive environment and compete effectively with the developed countries that have publicly funded health care and the emerging economies who do not have or do not care about such health care policies, we need to address this matter at once and do away with dogmatic and ideological policy platforms.

John’s right in saying “One of the key lessons from Japan is that the stocks that lead you into the crisis aren’t the ones that lead you out.”

Pared my banks down to JP Morgan, Wells Fargo and Bank of America all of which I hold for the dividend income. Betting Meredith Whitney is wrong about B of A cutting its. Will some time for the mega financials to recover.

Why would one assume that things are going to be okay? Working class Americans are heading into peonage as well paying jobs decline. No one will admit that there are not the jobs available even to a well educated working class because anything that can be transmitted can be done cheaper in Asia . India has a surplus of graduate Dr.s in all disciplines. There is no need to employ Americans when you can have engineering and design done much cheaper out of country. We have given our market and our jobs away and think we can grow with half of the population impoverished. It is likely that we will lead the world into a recession as access to our huge market has fueled a prosperity dependent on our continued buying of imported goods. It is sad to realize that we may go down hill for a decade or two.

The Affordable Care Act imposes economic burdens that are the equivalent of taxes, an economist writes. Read more…

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Economics doesn't have to be complicated. It is the study of our lives — our jobs, our homes, our families and the little decisions we face every day. Here at Economix, journalists and economists analyze the news and use economics as a framework for thinking about the world. We welcome feedback, at economix@nytimes.com.